2009 (8) TMI 856 - AT - Income Tax

Disallowance the set-off of short-term capital loss u/s 111A against the short-term capital gains u/s 115AD Losses - The case of the assessee is that the short-term capital loss in the later period be allowed set-off against the short-term capital gain of the former period to the extent of the excess of short-term capital gain over the short-term capital loss to the cut-off. On the other hand the Revenue is contending that only the short-term capital loss suffered by the assessee in the period before the cut-off date should be set-off against the short-term capital gain of that period and the remaining amount of Rs. 28.39 lakhs (Rs. 36.54 lakhs - Rs. 8.14 lakhs) be taxed at the rate of 30 per cent. HELD THAT - Our view about the vesting of the discretion in assessee for the purposes of set-off of short-term capital loss against any short-term capital gain is fortified when the language of sub-section (3) of section 70 is considered, which specifically prohibits the setting-off of long-term capital loss against short-term capital gain. In the absence of any stipulation in this regard in sub-section (2), we are satisfied that the choice has been left over to the assessee in taking decision about the setting-off of short-term capital loss from one transaction against any other short-term capital gain, whether within or outside the cut-off date. If higher benefit pours in from the exercise of the option in a particular way vis-a-vis the lower benefit resulting in the other way, then the higher benefit available as per law should not be denied. Income under the head capital gains is determined as per sections 45 to 55A. Section 48 with the heading Mode of computation provides that the income chargeable under the head capital gains shall be computed by deducting from the full value of the consideration received or accruing as a result of the transfer of the capital asset, the expenditure incurred wholly and exclusively in connection with such transfer and the cost of acquisition of the asset along with the cost of any Improvement, if any. Thus, the computation of capital gain, which is prescribed under section 48, the head capital gain so computed. Whereas, computation of capital gain is governed by section 48, but the rates of tax, insofar as we are concerned in the present appeal, are governed by sections 111A and 115AD. From the above, it is evident that the assessee has option to set-off of the short-term capital loss against the short-term capital gains as per the provisions of section 70(3) r/w section 111A and 115AD. Accordingly, in our considered opinion, the appeal of the assessee is covered and ground is allowed. levy of interest u/s 234B - Considering the fact that the assessee is non-resident, the levy of interest u/s 234B is uncalled for as all the payments to any non-resident assessee attract the TDS provisions. Accordingly, this ground is allowed. In the result, appeal of the assessee is allowed.

Summary

Issues: Appeal against disallowance of set-off of short-term capital loss, levy of interest under section 234B.

Issue 1: Disallowance of set-off of short-term capital loss
The appellant challenged the disallowance of set-off of short-term capital loss against short-term capital gains under sections 111A and 115AD of the Income-tax Act. The appellant contended that the option to set-off the short-term capital loss against short-term capital gains was available as per section 70(3) read with relevant provisions. The appellant relied on a co-ordinate Bench decision and argued that the choice of setting-off the losses rested with the assessee. The Tribunal analyzed the provisions and held that the appellant indeed had the discretion to set-off the short-term capital loss against short-term capital gains. The Tribunal emphasized that the language of the relevant sections did not restrict the appellant's choice in this matter. The Tribunal referred to precedents and concluded that the appellant was entitled to set-off the short-term capital loss against short-term capital gains. Therefore, the Tribunal allowed ground 1 of the appeal in favor of the appellant.

Issue 2: Levy of interest under section 234B
The second issue pertained to the levy of interest under section 234B of the Income-tax Act. The Tribunal noted that the levy of interest under section 234B was consequential and did not require specific adjudication. Considering the appellant's non-resident status and the applicability of TDS provisions to payments to non-resident assessees, the Tribunal found the levy of interest under section 234B to be unwarranted. Consequently, the Tribunal allowed ground 2 of the appeal in favor of the appellant.

In conclusion, the Tribunal allowed the appeal of the appellant, ruling in favor of the appellant on both issues raised in the appeal. The disallowance of set-off of short-term capital loss was overturned, and the levy of interest under section 234B was deemed unnecessary in light of the appellant's non-resident status and TDS provisions.